Sebi proposes major changes in investor grievance redressal mechanism

Along with making the process completely online, Sebi has suggested measures for reducing cost

The Securities and Exchange Board of India (Sebi) has proposed modifications in the investor grievance redressal mechanism, to facilitate dispute resolution and arbitration online on an end-to-end basis.

The proposed changes include doing away with the appellate arbitration system administered by market infrastructure institutions (MIIs), and reorganising the Investor Grievance Redressal Committee (IGRC) into a panel of mediators.

“To reduce costs for the parties, ease/eliminate the coordination issues in forming a panel and enable availability of a higher number of arbitrators for resolution of matters, it is proposed that all matters, irrespective of the amount of claim, be dealt with by a sole arbitrator, and accordingly, the requirement of a panel of arbitrators will be discontinued,” said Sebi.

Currently, a sole arbitrator is appointed under the MII-administered arbitration mechanism for matters involving claims of up to Rs 25 lakh, while a panel of three arbitrators is appointed for higher claims.

In a consultation paper floated on December 19, Sebi has suggested that the existing partially online mode can be enhanced to enable end-to-end online experience for investors and intermediaries. The regulator has suggested the use of tools like multimodal communication between the parties, automatic case-status updates, easy scheduling and appointment of arbitrators/mediators, etc.

“There is scope to make the processes followed  by  the  MIIs  themselves  more  efficient  and  accessible,  especially  given  the improvement in grievance redressal processes worldwide post the Covid-19 pandemic,” said the capital markets regulator.

Sebi has also recommended that the mechanism adopted by MIIs be extended to other specified securities market intermediaries which currently follow varying modes of grievance resolution.

For disputes where an MII or its subsidiary itself is involved as a party then such disputes will have to be referred to the dispute resolution process of another MII.

The proposals have been made based on the report of an internal working group and comments from the public have been invited by January 9, 2023. Sebi has sought comments on whether there should be a hybrid approach or online only, and the overhaul needed for the current fee structures.  

“MIIs would be required to upgrade the current mediation/conciliation and arbitration mechanism such that it is conducted as online mediation/conciliation and online arbitration. This process, as is the case presently, may be initiated post exhausting all means of resolution of complaints filed by the investor through the concerned intermediary/ entity, MII (as applicable) and the SCORES Portal,” noted Sebi.

Under the draft framework, MIIs will be required to publish the statistics and status of matters, outcomes, and disposals.